Common Carrier Regs for the Backbone?

by on May 26, 2006

Kevin Drum takes Matt Yglesias to task for suggesting that network neutrality might be new regulations rather than the simple continuation of existing regulations:

The 1996 Telecommunications Act defined two different types of service, information services (IS) and telecommunications services (TS), and cable companies were originally classified as IS and telephone companies as TS. Although both cable companies and telcos provide local internet access, the backbone of the internet is carried exclusively by telcos, which were regulated as common carriers under the tighter TS rules. The common carrier rules effectively enforced the principles of net neutrality on the internet backbone.

Is this right? I’ve always had the impression that peering agreements on the backbone itself have been basically anarchic–you could basically peer with whoever you wanted on whatever terms you wanted. That’s certainly the impression that the Wikipedia article on the subject gives. Can anyone fill me in on the subject?

Update: James Gattuso points to this excellent article by the Progress and Freedom Foundation on the Internet backbone. Some comments on this below the fold.

The PFF report makes clear how light the regulations of the Internet backbone has been. From 1996-2005, the FCC regulated the “last mile” of the Baby Bells’ old telephone infrastructure under common carrier rules. And the DOJ and FTC have used antitrust law to prevent any one backbone provider’s share of the market from getting too large. That’s it.

What that means is that aside from scrutiny during mergers, companies that weren’t Baby Bells were completely free of regulation of their Internet activities. And even the Baby Bells were free of regualtory scrutiny beyond their “last mile” residential infrastructure. Their backbone infrastructure and their Internet services to businesses were (and are) more or less immune to government regulation.

It’s worth stressing how small a share of the overall Internet the Bells’ “last mile” infrastructure represents. DSL represents less than half of the residential broadband market. The other half of the residential broadband market, cable, has been exempt from common carrier regulations since their inception.

But the residential market is is just one sector of the Internet. Telecom companies compete fiercely to provide more lucrative higher-speed Internet connections to small and medium-sized businesses. A growing number of retail establishments, such as coffee shops and hotels, are re-selling high-speed Internet access to their customers. Large institutions like Universities, government agencies, and Fortune 500 companies typically lease a big pipe directly from a Tier 1 backbone provider and have a dedicated IT staff that administers a substantial internal network. And that’s only considering the client side of the equation. There are also dozens of enormous co-location facilities that host the servers that deliver content to Internet users.

All of those non-residential markets are fiercely competitive, and none of them is subject to neutrality regulations at present. The claim that neutrality regulation is the way the Internet has always worked is false. It is, at most, the way that about half of one sector of the Internet has worked. The rest of the Internet has operated without significant government oversight for more than a decade.

So there’s no question that a network neutrality rule would extend reguators’ authority to significant parts of the Internet that are currently unregulated. We can have a reasonable debate over whether that’s a good idea or not, but let’s start by acknowledging that it is, in fact, an expansion of government control over a previously unregulated industry.

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